New norms for captive power units in the works

However, under another scenario, where the captive consumer does not need all the power from the venture, then the equity in the venture should be in same ratio as the captive capacity is with respect to the plant’s capacity. Put another way, if a consumer/firm wants to use 10 per cent capacity from a captive plant, his investment in the venture should also be at 10 per cent of 26 per cent or 2.6 per cent.

Such arrangements, however, may require shares from the plant to be identified at the time when the plant is being set up.

These guidelines are seen necessary as the Electricity Act is ambiguous on some critical clauses related to captive power. Not only are they open to different interpretations, state governments fear that the liberal exemptions, in order to promote investments in captive power projects, could be misused. As a result, both investors as well as state governments wanted clarifications on these clauses.

While the captive generator is free to sell power to other consumers/firms after meeting the captive requirements, the reason for such norms is that captive power is supposed to be ‘‘primarily for one’s own use.’’

The more serious issue that needed clarity is from the state electricity boards’ point of view as the exemptions were open to be misused leading to increased losses for the SEBs.

As captive users are exempt from cross-subsidy surcharges, state governments felt that there could be several cases of consumers/firms picking up nominal equity in plants located anywhere in the country but still claim benefits accorded to captive units. Additionally, there’s also the possibility of independent power producers or IPPs being converted into captive ventures.

Power ministry sources said the guidelines for captive power plants are based on the existing norms for captive coal units.